Compensation and Benefits
Update
February 2009
Betsy Rodriguez
Vice President for Human Resources
rodriguezea@umsystem.edu
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February 2009
Context – National Economy
• Colleges and Universities are making drastic
budget cuts due to:
• Reduced investment earnings
• Reduced state appropriations and other revenues
• Budget cuts result in layoffs, furloughs, salary
cuts, benefits reductions
• See Chronicle article on university pension
plans
• It all happened very quickly!
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February 2009
Quote from President Forsee
• “The worst thing that can happen is that we
delay actions, that we wait for the perfect
answer to come, and then we find out that we
can’t execute (a plan) without doing
something that would dramatically affect our
mission.”
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February 2009
Board Actions
February 2009
Board of Curators Meeting
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February 2009
Compensation Changes
• Guiding principles for compensation changes:
 Minimize current impact to employees whose
annual salary is below $50,000
 Maintain competitive position within peer group
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February 2009
Delegated Authority: Transition Assistance
• Authority to President to develop a procedure
for employees who lose jobs due to budget
reductions
• Transition Assistance components:
 Continued access to medical insurance
 Severance pay based on years of university service, with
cap
 Available only to staff
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February 2009
Delegated Authority: Furloughs
What is a furlough?
• Unpaid time off, typically a few days per year
• Gives university ability to reduce salary costs
on a one-time basis
• Complicated by need to keep essential
functions
• President required to have board discussion
• President’s authority ends June 30, 2009
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February 2009
Overtime Calculation
• Eliminate paid leave as part of overtime
calculation – pay overtime only on actual
hours worked
• Most employers do NOT allow paid leave to
count toward overtime
• Results in annual savings of about $2m
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February 2009
Information Items: No Board action
• No early retirement package
• Too expensive (create long-term liability)
• Disruptive to workplace
• FY2010 Salary pool
• No merit increases
• Possible 1% pool (e.g., faculty promotions, mid
year retention, and market adjustments)
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February 2009
Context for pension plan change
• Actuarial study 10-1-08
• Investment projections
• Peer group comparison
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February 2009
How do we compare to our peers–
for benefits?
Benefit Index Relative Value Study
Employer Paid Value
Current Retirement
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Rank
(out of 15)
2/3
11
Total Value
Index
Rank
(out of 15)
Index
117.9
14/15
77.6
February 2009
Actuarial Value of Liabilities vs. Assets
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February 2009
History and Future UM Contribution Rates
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February 2009
Employee Contribution to
Retirement Plan
• Allows UM to continue commitment to
support meaningful pension benefits
• 1% up to $50,000 salary; 2% on all salary
above $50,000
• Annual fiscal impact - $11.9 million (based on
current salaries)
• Employees will contribute on a pre-tax basis
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February 2009
Paycheck Examples
Annual Benefit Eligible Salary
Monthly contribution (pre-tax)
•
$36,000
$30
•
$50,000
$42
• $150,000
$208
Hourly Wage
Biweekly Contribution (pre-tax)
• $10/hour
$8
Note: Net impact on take home pay will be based on
individual’s tax rate.
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February 2009
How Does the Money Flow?
UM
Benefits
Employee
Contributions
Retirement Trust Fund
Budget
When UM share is
greater than budget
Total Required Contribution
2009
5.87%
2010
6.12%
2011
8.80%
2012
10.7%
2013
12.2%
Budget Stabilization
Fund
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February 2009
How do we compare to our peers–
for benefits?
Benefit Index Relative Value Study
Employer Paid Value
Rank
(out of 15)
Current Retirement
Future Retirement
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Total Value
Index
Rank
(out of 15)
Index
2/3
117.9
14/15
77.6
7/8
101.9
14/15
77.6
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February 2009
How do we compare
to our peers—for
salary?
AAU Public
Average Faculty
Salaries
10-Year Trend
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b
February 2009
Questions? Comments?
‘Frequently Asked Questions’ on benefits web
site: www.umsystem.edu/benefits
or
email your questions to:
benefits@umsystem.edu
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February 2009